Adria Lopez has found that her line of computer desks and chairs has become very

Question

Adria Lopez has found that her line of computer desks and chairs has become very popular and she is finding it hard to keep up with demand. She knows that she cannot till all of her orders for both items, so she decides she must determine the optimal sales mix given the resources she has available. Information about the desks and chairs follows. Adria has determined that she only has 974 direct labor hours available for the next quarter and wants to optimize her contribution margin given the limited number of direct labor hours available. Required: Determine the optimal sales mix and the contribution margin the business will earn at that sales mix. (Round your per unit answers to 2 decimal places.)

Explanation / Answer

1) Ans, Desks Chairs Contribution on Desks and Chairs $        616.25 $     215.00 Labour Hour 5 hour 4 hour Contribution per direct labour hour $        123.25 $        53.75 Ans) Desks Chairs Maximum number of unit to be sold 166 50 Hours required to produce Maximum units 830 200 (166*5) (20*4) Ans) Desks Chairs Total Hours dedicated to the production of each product $              830 $           144 $              974 Units produced for most profitable sales mix 166 36 Contribution margin per units $              123 $              54 $              177 Total contribution margin $        20,460 $        1,935 $        22,395

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